The annual deferred payments to Bobby Bonilla actually worked out quite well for the Mets

If you are a conscious baseball fan, or someone who appreciates irony, or any sort of sentient being, you likely know by now that the New York Mets pay long-retired former player Bobby Bonilla some $1.2 million a year every year on July 1 as part of a deferred payment schedule they negotiated when buying out Bonilla’s $5.9 million contract before the 2000 season. You probably heard about it this morning, or around this time last year, or in 2013, or the year before that, or the year before that, and so on.

When they agreed to the new terms with Bonilla in 2000, the Mets’ owners believed they were receiving outrageous returns on their investment with Bernard Madoff, so the move made financial sense for the club given the information it had. Once Madoff’s Ponzi scheme became public and the Mets fell into financial ruin, Bonilla’s contract became an obvious and, to be fair, hilarious
punchline. For a while in 2013, he earned more from the Mets than any of the outfielders actually on the roster. He was 50 years old.

And though Bonilla hit really well in his first turn with the Mets from 1992-1995, his tenure in Flushing is better remembered for some outlandish and blustery comments than any big moments on the field, his sturdy .851 OPS in a Mets uniform overshadowed forever by the massive contract that first put him on the Mets and the massive deferment that finally sent him away.

But as Erik Malinowski pointed out at Buzzfeed back in 2013, the Bonilla deal nearly paid huge dividends for the 2000 Mets. Not only did it rid them of a player that promised “fireworks in the millennium” if he did not play regularly in 2000, but it freed up payroll in the short-term that allowed them to build a National League champion that same season.The Mets were all too happy to be rid of Bonilla at whatever conceivable cost. The fans were happy, and Bobby Bonilla was really happy. The Mets were only swindled in the sense that the reason that they were so comfortable about their long-term prospects is that they were investing in a Ponzi scheme. But at the time, the idea that this was a worthwhile move — to free up the short-term cash and flexibility that could help win a World Series — was prevalent.

 In fact, by freeing up that nearly $6 million, the Mets were able to make moves like trading for Mike Hampton, then a prime No. 2 pitcher who, as any Cardinals fan might tell you, almost singlehandedly won the 2000 National League Championship Series. That likely never happens if Bonilla is still in Queens. At least the Mets got a pennant for their troubles, which is more than can be said for Baltimore, which is paying Bonilla $500,000 a year through 2015 in a similar buyout negotiated years before the Mets did theirs.

Hampton, coming off a 22-win campaign with Houston in 1999,earned $5.75 million in 2000 — almost the exact amount the Mets kicked down the road by deferring payments to Bonilla. And Hampton pitched well in the club’s rotation in 2000, then earned the NLCS MVP by throwing 16 shutout innings in two starts against the Cardinals to help the franchise to its fourth World Series berth.

And the Bonilla deal only gets better: When Hampton signed perhaps the worst free-agent contract in baseball history with the Colorado Rockies that offseason, the Mets received a compensatory first-round draft pick, the 38th overall selection in 2001.

With that pick, the one they got for Mike Hampton — whom they were able to afford because they deferred payments to Bonilla — the Mets selected a Virginia high-school infielder named David Wright. Wright grew up to become arguably the best position player in franchise history, the Mets’ all-time leader in practically everything.

David Wright (PHOTO: Al Bello/Getty Images)

Maybe that’s a tenuous way to connect the dots from Bonilla, and Wright — like so many great Mets before him — takes far too much blame from some corners of the club’s fanbase and media for the failures of the players and executives around him during his generally excellent career. Plus, he’s on the disabled list now with spinal stenosis with no clear timeline for his return, and his own massive contract extension looks like it could prove an albatross.

But Wright was so good for the Mets in the first 10 seasons of his career that it’s pretty easy to argue he provided them far, far more in excess value than the $29.8 million they’ll make in deferred payments to Bonilla. The estimated dollar value of a player’s production changes by year, naturally, but by Fangraphs‘ current dollar/win value to estimate what he’d be worth in free agency, the Mets could expect to pay some $313.5 million for a player to provide what Wright has given them. They’ve paid him about $100 million so far.

Obviously, that’s murky math and there was a ton of randomness involved in the process that got the Mets from dismissing Bonilla to drafting Wright. But randomness dominates baseball, and those particular bounces seem to have worked out in the Mets’ favor.

And — and! — though the Mets’ owners agreed to defer payments to Bonilla while invested in Madoff’s scheme, it wouldn’t have been a poor decision even if they were investing sensibly. Cork Gaines atBusiness Insider does the math:
To criticize the deal is to not understand that Bonilla gained nothing and the Mets actually came out ahead in the deal.
If Bonilla had accepted the $5.9 million in 2000 and invested the entire amount at 8% interest, the original investment would have grown to $104.1 million by 2035*. If instead, Bonilla takes his annual payment and invests that with an 8% annual return, he would have $95.2 million by 2035….
But more importantly to the Mets, if they invested the $5.9 million at 8% interest in 2000. That money would have grown to more than $14 million before they had to make a single payment. And that money would continue to draw interest even while they are making payments.

So, to recap, by renegotiating Bobby Bonilla’s contract in 2000 to pay him $1.19 million annually from 2011 to 2035, the Mets:

1) Achieved the financial flexibility necessary to acquire players that put them in the World Series that season.
2) Got rid of a massive headache.
3) Earned a draft pick they used on seven-time All-Star David Wright.
4) Made a reasonably shrewd financial decision.
5) Became an annual laughingstock.

Source : ftw.usatoday.com